CHAPTER ONE

GENERAL INTRODUCTION

1.1 BACKGROUND OF THE STUDY

Winding up and liquidation are words used when a company or companies are about terminating or closing down the business. Winding up and liquidation are terms commonly used in United Kingdom, Republic of Ireland and United States of America law and business which a company takes to go out of business. A company just like a baby is born and dies. Liquidation is the proceedings for the realization of assests, the payment of creditors and the distribution of the surplus, if any among the shareholders; so that the company may finally be dissolved. Winding up is defined by the Blacks laws dictionary 9th Edition¹,  to mean the process of setting accounts and liquidating assests in anticipation of partnership or corporation dissolution. Professor Gover in his book ( Principle of Modern Company Law) has described the winding up of a company in the following words. To him, winding up of a company is a process whereby it’s life is ended and it’s property administered for the benefit of it’s creditors and members². An administrator called a liquidator is appointed and he takes control of the company, collects it’s assests, pays it’s debts and finally distributes any surplus among the members in accordance with their rights. Winding up and liquidation should not be taken as if it is dissolution of a company. The winding up proceeds it’s dissolution. Prior to dissolution and after winding up, the legal entity of the company remains and it can be sued in a court of law. Liquidation is the last stage in the proceedings of dissolution. On dissolution the company ceases to exist, it’s name is actually struck off from the Register of companies by the Registrar and the fact is published in the official Gazette. Every company shall be set up for a duration which shall be indicated in the Articles of Association in spite of it’s longevity. Concerning the duration of a company, no matter how the members deliberate on it, the life of the company does not go beyond ninety- nine years (99) by virtue of  Section 1 Article 28 of the OHADA Uniform Act ³. But except otherwise provided by the U.A, the existence of a company shall commence on the date on which it is registered in the Trade and Personal Property Rights Register Section 1 Article 29 of the U.A⁴. The expiry of the term shall entail the automatic dissolution of the company, unless an extension has been decided upon in accordance with the condition laid down in Article 32 of the U.A. Section 1 Article 30 of the U.A Section 2 Article 32 of the U.A stipulates that the existence of a company maybe extended one or more times⁵. Section 2 Article 34 indicates that the extension of the duration of a company shall not entail the creation of a new legal entity ⁶. A company’s existence can be terminated. This maybe through a winding up proceeding. The immediate consequence of dissolution of the company. This is in line with the collection and realization of company’s assets to settle a list of contributions and creditors Inorder to pay the company debt and liabilities and to divide the surplus if any. The OHADA U.A does not define the concept of dissolution but the legislator has simply enumerated the causes of dissolution and precised it’s consequences and possible solution for the restoration of dissolved companies will also be mentioned. Commercial companies in Cameroon are being governed by a text the Harmonization of Business Laws in Africa, known as ‘OHADA’ which establishes a modern and common legal framework for business activities, through eight Uniform Acts directly applicable to it’s member states.

Corporate issues are therefore regulated in Cameroon by the OHADA Uniform Act on commercial companies and economic interest Groups ( hereinafter refered to as the ‘Uniform Act’ which entered into force on the 1January 1998 and supersedes all contradictory provisions of national regulation. Considering that all the provisions of the U.A are mandatory, they may only be derogated from when this is expressly stayed therein. Accordingly, any commercial companies having their registered office on the territory of one of the member states are subject to the same provisions of the U.A regarding their formation, incorporate, management and dissolution, whether they are foreign owned company or local company. By virtue of definition, Article 4 of the OHADA Uniform Act stipulates that a commercial company shall be formed by two or more person’s who agree, by contract, to assign assets in cash or kind to an activity for the purpose of sharing profits or benefiting from savings that may accrue there form⁷. The members of the company shall bear the losses in accordance with the conditions laid down by this U.A. a commercial company shall be formed in the common interest of the members ⁸.

1.2 STATEMENT OF THE PROBLEM.

There are basically three legal ways by which commercial companies in Cameroon are dissolved, that is, compulsory by Court Order, Voluntary and dissolution under the supervision of the court. Many of these companies are dissolved without following the proper legal procedure despite the laws put in place by the government. Our main problem or focus is to show or examine the legal requirements, conditions or causes and the process or formalities in which commercial companies need to follow in going out of business. The effects is also a call for concern in the winding up and liquidation proceedings.

1.3. RESEARCH OBJECTIVES.

1.3.1. Main objectives

To critically examine the procedure for the dissolution of a company

1.3.2. Specific objectives.

-To examine the conditions for winding up and liquidation of commercial companies,

-To analyse the liquidation process of commercial companies in Cameroon.

– To discuss the effects of winding up and liquidating commercial companies on the company, creditors, shareholders and employees.

-To make recommendations

1.4 RESEARCH QUESTIONS.

1.4.1. Main research question;

What is the process for the dissolution of a company?

1.4.2. Specific research question;

– What are the conditions of winding up and liquidation of commercial companies?

– What is the process of liquidation of commercial companies?

– What are the effects or impacts of winding up and liquidating commercial companies?

– What recommendations can be made for the winding up of companies in  Cameroon